When looking at the best loans for bad credit, we’ve found that it depends on what you need. For example, the best lender for emergency loans is OneMain Financial, while Peerform is the best lender for peer-to-peer lending. We go into more detail about these lenders, as well as lenders that are best for other types of loans, such as for credit building or for a mobile app.
In this look at best loans for bad credit, we focus on personal loans, what they are, the interest you might get depending on your credit score, what a bad credit score is, and of course, great lenders of loans that accept bad credit.
To determine the best personal loans for bad credit, we used our proprietary SimpleScore methodology to evaluate each lender’s rates, terms, loan amounts, customer support and fees. We analyze these metrics to choose the best personal loans for you.
When we rate and review online bad credit loans, we use our SimpleScore methodology, which we’ve made available to review in the spirit of financial wellness, transparency and honesty. The SimpleScore rating system uses five identifiable and measurable factors to assign a score to each brand in the bad credit loans category. SimpleScore makes it easy to compare bad credit loans online in order to make informed and financially sound decisions regarding your next lending product.
The best bad credit loan lenders of 2021
Latest news on bad credit loans
Compare the best lenders for bad credit loans
|Lender||APR||Loan Amount||Terms||Minimum Credit Score||SimpleScore|
|OneMain Financial||18.00%–35.99%||Up to $20,000||Up to 60 months||Not listed||4.5|
|Peerform||5.99%–29.99%||$4,000–$25,000||3 years||600 FICO score||4|
|NetCredit||34.00%–155.00%||Up to $10,000||6–60 months||Not listed||3.2|
|Avant||9.95%–35.99%||$2,000–$35,000||24–60 months||Avant borrowers have a credit score of 600–700||3.75|
|PersonalLoans.com||5.99%–35.99%||Up to $35,000||90 days–72 months||600||4.25|
|BadCreditLoans.com||5.99%–35.99%||$500–$5,000||3–36 months||Not listed||3.6|
What is a bad credit personal loan and how does it work?
Personal loans Are offered by online lenders, banks or credit unions. Personal loans for people with bad credit generally come with a higher interest rate, a shorter term and lower amounts. Only consider taking out a bad credit personal loan if you’ve exhausted all other options for getting money and you know you’ll be able to pay it off quickly.
A bad credit score may rule you out for the best interest rates, but that doesn’t mean you won’t have access to the funds you need. In 2019, Transunion’s Q4 Industry Insights Report found balances on personal loans totaled a record high of $161 billion, up $23 billion from the year prior.
Personal loans have a fixed terms and interest rates, which makes budgeting for repayment easy since you know what your payment will be each month. The term of your loan will vary from lender to lender, though repayment periods are usually between 24 and 84 months. A longer term means lower monthly payments, but more interest over time. Since bad credit loans often have higher APRs — like, up to 400% high, you should expect to pay more in interest and fees.
Be wary, however, as easy bad credit loans come with a price — the terms attached to bad credit loans stack the odds of repayment very much against the borrower and are generally difficult to reasonably pay back.
To avoid cheap bad credit loans that may further harm your finances, It’s best to find reputable online personal loans for bad credit providers that have APRs under 50% to avoid cheap bad credit loans that may further harm your finances. It may seem difficult, but it is possible to get a bad credit loan without risking your credit more than necessary.
Common uses for a personal loan and what you can use a bad credit loan for
Before you take out a loan, consider your entire financial situation. If you have poor credit, you’ll end up with a higher interest rate, which means more money paid back in the long run.
Bad credit personal loans can be put to any use. Whether you’re interested in debt consolidation to improve your credit score or adding a quick infusion of cash to your bank account, a subprime loan can help. Some of the most common uses for personal loans for bad credit are:
- Paying off high-interest credit card debt
- Debt consolidation
- Home improvement projects
- Paying off medical bills
- Unexpected emergencies
- Cover moving expenses
- Refinancing existing loans
- Military loans
The best bad credit loan lenders
Personal Loans Estimated APR per credit score ranges
It’s important to understand what bad credit is and where you stand ahead of finding the right loan. Your credit score is a triple-digit number that reflects your history in lending and using credit cards. If you regularly miss payments or max out your credit cards, you will mostly likely have a bad credit score.
However, this number is not arbitrarily assigned. Certain parts of your credit history affect your credit score in different ways. Payment history, amounts owed, length of credit history, new credit and credit mix are all considered when your credit score is calculated.
|Credit score||Estimated APR||Detail|
|Excellent Credit (720 and over)||Under 9%||Excellent credit will unlock the best rates across all lenders.|
|Good Credit (660–719)||9%–14.99%||A credit score of 700 means you’re in about the 50th percentile|
|Fair Credit (600–659)||15%–35.99%||You’ll most likely qualify for a number of loans, though there is no guarantee you’re getting the best possible terms.|
|Poor Credit (under 600)||36% and over||Having a poor credit score makes it harder to open new loans.|
These rates are based on lenders’ advertised personal loans rates and their recommended credit score and borrower eligibility requirements. Your personal loan rate may be different based on income, employment history and current debts.
We found 51% of Americans don’t check their credit score
Percentage of personal loans borrowers per credit score
Source: TransUnion Monthly Industry Snapshot
Last Updates: December 2020
[ Keep Reading: Survey: Half of America Doesn’t Check Their Credit Score at All ]
What is a bad credit score?
A bad credit score can range from 300 to 600, making it more difficult and costly to get a personal loan. Whereas, fair credit scores are 600 and over on an 850 scale. Remember that your credit score will vary depending on the credit bureau.
Here are other bad credit score ranges to think about:
- FICO: A bad FICO credit score is below 650 on an 850 scale.
- VantageScore: A bad VantageScore is 300–619 on an 850 scale.
- Equifax Score: A bad Equifax score is 280–559 on an 850 scale.
How credit scores are calculated
Your score is calculated based on debt owed, new credit established and payment history — which is why it’s important to pay bills early or on time. The length of history and credit mix is also factored in to determine your score. Take a look at the breakdown to see how these factors add up.
- Payment history: 35%
- Amounts owed: 30%
- Length of history: 15%
- New credit: 10%
- Credit mix: 10%
How will applying for a poor credit loan impact my credit score?
Getting a poor credit loan may cause your credit score to take a slight dip because the lender will perform a hard credit check when you apply. Your credit score can drop as much as five points with a hard inquiry, but it could drop less if you don’t have any outstanding issues on your credit report. Your score usually returns to normal after a few months after your inquiry. Fortunately, inaccurate hard inquiries can be disputed and removed if you find an error on your credit report.
Oftentimes, if you have multiple inquiries over 14 to 30 days, lenders will count those as one single inquiry, and you won’t be penalized for each individual inquiry over this time period. So it’s best to do the bulk of your loan applications in a short time span if you need to apply to more than one.
Do you know your credit score?
There are a few ways to find out your credit score for free, but it’s best to use AnnualCreditReport.com. You’ll get one free credit report from each of the three credit bureaus once a year meaning you can check your credit score every four months by alternating credit bureaus. You can order your reports by mail, phone or online. You can also check with your bank or credit card holder to order a credit report.
Some secure credit websites, like FreeCreditReport.com, also let you check your credit score, monitor your amounts owed and get updates of any changes for free.
There’s a common myth that checking your credit score will negatively impact your credit score. But regularly checking your score helps you catch any changes or signs of identity theft. Just be careful of checking your credit score too often. Requesting your credit report from a credit bureau or bank is a soft inquiry — which doesn’t impact your credit score like a hard inquiry for a loan would.
Types of personal loans for bad credit
Before you apply for a loan, it’s important to understand the different types and what borrowing could mean for your financial situation. Some of these loans may be harder to get if you have bad credit, but lenders offer many options to help you get the money you need at the best rate possible.
How to get a loan with bad credit
- Evaluate how much you need: Try not to take out more money than you need. Don’t forget loans have interest and fees, so getting out more than you need can impact your ability to repay the loan.
- Check your credit score: To start, you’ll want to go through your credit report to ensure there are no errors that need to be corrected. Did you know that you can get a free credit report each year? Before applying for a loan, pull your credit report from AnnualCreditReport.com. This site is offering free weekly credit reports until April 2021 in light of COVID-19.
- Gather your financial documents: Here are the documents required to get a bad credit loan: proof of identity with a driver’s license or birth certificate, recent tax returns or W-2s, proof of address with utility bills or insurance documents, and your Social Security number.
- Consider a secured loan: With poor credit, getting a secured loan is easier than an unsecured loan. This will mean that you’ll need to put forth an asset before you can obtain the loan.
- Prequalify for a loan: Often done online, prequalifying for a loan lets you know exactly how much you can borrow and what the terms of the loan will be. Lenders will perform a soft credit pull, which will not impact your score.
- Finalize: To finalize your loan, the lender will perform a hard credit inquiry. Remember: too many hard inquiries will negatively affect your credit score.
- Work towards paying off your loan: Once you have your loan, make a realistic budget for repayment. Without a clear plan for repayment, it’s easy to fall behind on payments and damage your credit even further.
[ Next: How to Get a Loan With Bad Credit ]
[ Next: Best Installment Loans for Bad Credit ]
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We welcome your feedback on this article and would love to hear about your experience with the bad credit personal loans we recommend. Contact us at email@example.com with comments or questions.